Email, Mark J. Mazur, Robert C. Pozen Director, Tax Policy Center, Jan. 2, 2017
From: Selby, Gardner (CMG-Austin)
Sent: Tuesday, January 02, 2018 6:05 PM
To: Mazur, Mark
Subject: Today's interview
I wanted to circle back. From my notes, you pointed out to me that from the get-go, some taxpayers within each income bracket will likely pay more in taxes--though 95 percent will see reductions. You also pointed out a table in the report showing both average tax reductions within each quintile of income and that a subset of taxpayers in each quintile stand to pay more in taxes in the plan’s first year, 2018. At the low end, Table 4 in the report states that 1.2 percent of taxpayers in the lowest quintile will pay more that year; at the high end, the chart indicates, 6.2 percent of taxpayers in the highest income quintile stand to pay more than if the law went unchanged.
Asked to explain why some taxpayers at all levels will pay more, you said that taxpayers ponying up more will end up doing so for idiosyncratic reasons. For instance, you said, a low-income taxpayer with many dependents =accustomed to many itemized deductions might be hurt by the law’s elimination or reduction of specific deductions and personal exemptions. “Families with lots of personal exemptions” under the old law, Mazur said, “could be made worse off.”
You also said the law’s limit on deductible state and local tax payments could leave some taxpayers confronting higher federal taxes--though you said that would apply across the country, not just to residents of San Francisco or Manhattan.
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W. Gardner Selby
Reporter / News
First, I think I said that about 80 percent of taxpayers will see reductions in 2018, that about 5 percent will see increases, and that about 15 percent will experience little or no change (this was from the table on page 6 of the report we discussed). But that this means that at least some people in every income category will see some increase in their tax liability. (And that is how the chart shows the share of taxpayers with an increase varying from 1.2 percent and up.)
On why taxes might go up, I did say that there were idiosyncratic reasons behind those results. Larger families with lots of dependents who are not eligible for the child tax credit (for example because the children are too old or because the dependents are not children) could see a tax increase because the loss of personal exemptions could be greater than the increase in the standard deduction). In addition, some taxpayers with large amounts of deductions (e.g., moving expenses, casualty losses, alimony paid) could be made worse off under the new law. Similarly, taxpayers with state and local tax payments over $10,000 cold be made worse off under the law, because their itemized deduction amounts could be trimmed. This can occur anywhere in the country, though states and localities with higher taxes generally would be the most likely to bump up against the $10,000 annual limit.
The quote you have from me is correct, but it really is “could” because most people will be better off under the new law. It might have been better if I had said “potentially could”.
Hope this helps.